Leaders Are Rarely Developed by Accident, only by Design

"Where will we find them?" is the plaintive query by R. Suresh, managing director (India) of search firm Stanton Chase. Suresh is talking about the 5,000 CEOs he estimates India Inc. is going to be clamouring for over the next four years.

But is that really an issue? You can always go and pick a CEO in the market. That is what labour markets exist for! This is a make versus buy decision that most organisations have never had to grapple with so far.

Make or Buy Leaders?

Leadership development too is an outsourcing issue. Do we do it in-house or let somebody else do it for us? Most firms have historically followed the latter approach. And the reason is perfectly understandable.

If you look back to how the Indian economy operated 15 years ago, success was defined by doing two things very well:- one , getting a licence; two , making sure nobody else gets it.

The key skill required was the ability to manage regulators effectively. Managing the competition was never an issue. It didn't exist because of shortages. The market has evolved considerably over these 15 years. And going ahead, you'll agree, it will change even faster.

So, naturally, good quality leaders are going to be in demand, especially those who can lead and manage successfully in this hyper-competitive environment. And we are already seeing this kind of a person is not easy to find.

So this is what happens: there is too much money chasing too few good people. Just like too much money chasing too few good stocks. In both cases, the result is the same. Stratospheric valuations.

The real beneficiaries of this supply-demand mismatch will be these professionals, and perhaps Suresh and his ilk. Good for them.

This rising tide lifts all boats, and we will get to see the managerial equivalent of penny stocks also command lofty valuations. And they too will get to rise far beyond their level of (in)competence in this seller's market.

Conjecture or Flight of Fancy?

If you believe that the shortage of competent leaders will get worse in the future, the rest is a natural corollary. If you want to know how worse it can get, I am as clueless as my neighbour.

Recent research by two Harvard professors has also thrown up the disquieting result that "Star" employees who thrive in one company often fail to duplicate their stellar performance when they jump ship and join a rival.

These stars, the researchers go on to say, "not only lose the support of the team that helped them rise to the top, but fall short in rapidly learning how a new organisation works." So, buying leaders may not be a good idea after all. Making them in-house might make sense, both in terms of economics and governance.

Having presented you with this piece of information, let me also clarify that there are times when getting CEOs from outside is the best thing you can do for the organisation. But wisdom, as always, lies in knowing when to.

A few years ago, Jack Welch of GE visited the Tuck School